British American Tobacco 1st Half Beats Hopes, Forecasts Strong Year

British American Tobacco PLC (BATS.LN) Wednesday beat expectations with its first-half results and forecast another year of good growth in both profit and dividends.

The London-based tobacco company said its sales increased to GBP7.3 billion in the six months to June 30 from GBP6.78 billion the previous year while earnings per share were 87.1 pence, up from 77.3 pence and ahead of market expectations.

Striping out acquisitions, volumes for the half were down 3%, compared with a 4% fall in the first quarter and a 2.4% drop in the last three months of the previous year.

"British American Tobacco's business is in very good shape, with continued pricing momentum, increasing market share in key markets and improving organic volume trends, said Chairman Richard Burrows in a statement.

"While the comparisons with 2009 will become tougher in the second half, shareholders should see another year of good growth in both earnings and dividends."

Rival Imperial Tobacco Group PLC (IMT.LN) disappointed the market last week with a 4.3% decline in volumes in the third quarter.

BAT's total revenue growth was driven by strong price rises and the acquisition of PT Bentoel in Indonesia in June last year.

Tobacco firms are usually able to raise prices to offset any volume declines. Price rises are often pushed through at the same time as duty increases--of which there have been plenty in recent months as governments try to reduce budget deficits.

The company's proven ability to grow profit and sales despite falling volumes has resulted in a 25% rise in the company's share price over the last year. They closed Tuesday at 2259 pence.

-By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; michael.carolan@dowjones.com

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